Indian benchmarks complete a hat-trick of gains; comprehensively outperform global peers

Indian frontline equity indices managed to extend the sanguinity on last trading day of the week and extended the winning streak for the third straight session. The climb of over three fourth of a percentage point for the benchmarks appeared even more prominent given the fact that the gains came on a day when equity indices around the world suffered heavy pounding as market participants continued to account for a disappointing US nonfarm payrolls figures scheduled to be announced later in the day amid signs that the US economy is losing momentum. The major Asian peers went through a turbulent day deposing well over a percent while European counterparts got lacerated by around two percent on fresh worries over the Greek sovereign debt crisis. On the domestic front, marketmen were busy analyzing an assortment of economic reports that came to the fore. Firstly the weekly inflation numbers failed to provide any kind of underpinning as food inflation, measured by WPI, stood at 10.05% for the week ended August 20 up from 9.80% in the previous week, which is likely to put the Indian central bank in a tight corner. However, fuel price index moderated to 12.55% from 13.13% in last week. India's financial position brought in more worry for policymakers as fiscal deficit crossed the half-way mark and shot up to 55.4% of the full year target to touch Rs 2,28,753 crore in the first four month of 2011-12. Furthermore, a survey of India's manufacturing PMI showed that manufacturing activity expanded at its slowest pace in more than two years as export orders contracted because of weakening global demand. Meanwhile, sentiments in local equity markets took support from the surprisingly encouraging performance of eight core infrastructure industries which showed good upmove in July 2011 and surged to 7.8% from 5.7% in the same period last year, on the back of healthy growth in steel, electricity and cement sectors. Meanwhile the shares of automobile and cement companies kept buzzing in the session as they released monthly sales numbers. Stock like Tata Motors, Mahindra and Mahindra, TVS Motors, Bajaj Auto, Ambuja Cement and ACC garnered a lot of traction and surged 1-4% post announcing good monthly sales numbers.

Earlier on Dalal Street, the benchmark got off to a gap up opening, shrugging the daunting sentiments prevailing in Asian markets ahead of the release of key jobs data from the United States. But hefty profit booking at higher levels led the frontline indices to immediately drift to lower levels. The key indices were swift enough to move back to around sessions' highs in late morning trades. But the attempt of frontline indices to climb to higher levels met with severe resistance around the psychological 5,050 (Nifty) and 16,900 (Sensex) levels in early afternoon trades as the optimism got tempered by discouraging European market opening. Just when it looked like the indices will not be able to forestall the decline and slip into the red terrain, the indices found support and speedily recovered. Finally the NSE's 50-share broadly followed index Nifty, accumulated over three fourth a percent to settle just below the crucial 5,050 support level while Bombay Stock Exchange's Sensitive Index, Sensex garnered around one hundred fifty points and ended above the psychological 16,800 mark. In the broader markets, the midcap index traded on an optimistic note through the session, but the smallcap indices failed to match the fervor displayed by their larger peers and settled on a flat note. On the BSE sectoral space, the metal counter remained amongst the favorites of the marketmen as it soared over two and half a percent, being the top gainer in the space followed by Consumer Durables and Oil and Gas pockets which amassed over two percent gains. The rate sensitive counters like Automobile and Realty too witnessed huge buying interests and rallied 2.09% and 1.73% in the session. On the other hand, the information technology pack witnessed a lot of selling pressure and languished at the bottom of the table with over a percent loss, tracking the global sell-off in technology shares post disappointing finish in the US session. The Capital Goods and Power sectors too remained among the worst performers in the session. The markets bounced on weaker volumes of around Rs 1 lakh crore while the turnover for NSE F&O segment too remained lower compared to Tuesday at over 0.83 lakh crore. The market breadth remained optimistic as there were 1660 shares on the gaining side against 1157 shares on the losing side while 121 shares remained unchanged.

Finally, the BSE Sensex gained 144.71 points or 0.87% to settle at 16,821.46, while the S&P CNX Nifty advanced by 39.00 points or 0.78% to close at 5,040.00.

The BSE Sensex touched a high and a low of 16,989.86 and 16,688.06 respectively. The BSE Mid cap and Small cap indices were up by 0.81% and 0.03% respectively.

The top gainers on the Sensex were DLF up 5.93%, Tata Steel up by 4.26%, Sterlite Industries up by 4.04%, Mahindra & Mahindra up by 3.87% and Bajaj Auto up by 3.21%.

On the flip side, Tata Power down 2.13%, TCS down 1.82%, BHEL down 1.74%, NTPC down 1.56% and Infosys down 1.16% were the top losers on the index.

The top gainers on the BSE sectoral space were, Metal up 2.75%, Consumer Durables (CD) up 2.19%, Oil & Gas up 2.16%, Auto up 2.09% and Reality up 1.73%. While IT down 1.31%, Power down 0.97%, TECk down by 0.53%, Consumer durables (CD) down by 0.14% were the top losers on the BSE sectoral space.

Meanwhile, India's manufacturing sector expanded at its slowest pace in more than two years as export order contracted because of weakening global demand, a survey of manufacturers in Asia's third largest economy showed. The HSBC Markit India Manufacturing Purchasing Managers' Index (PMI) declined to 52.6 in August from 53.6 July, this is the fourth month when India's manufacturing PMI moderated. However, India's manufacturing PMI is still above the 50 level which demarcates growth from contraction. India is among the few economies that showed growth, in a likewise surveys released on August 1, showed contraction in manufacturing activities in Britain, Euro Zone and China.

New export business received by manufacturers in India decreased markedly during August, with the rate of contraction one of the sharpest in the series history. Experts cited a softening in global economic conditions as the main contributor to the fall in new orders received from export markets. This contributed to a further slowdown in the growth rate of overall new work intakes, which was the weakest in the current 29-month sequence of expansion.

As per the survey, in the month of August, the employment in Indian manufacturing sector registered a marginal decline. The purchasing activities also showed moderation, and registered a 21-month slowest growth in August. Input price faced by manufacturers in India continued to increase significantly due to the surge in raw material prices. Output prices continued to rise at a historically marked rate, despite slowing marginally since July. 

While commenting on India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, 'the growth momentum in India's manufacturing sector eased further in August. The main driver of the weaker reading was a significant contraction in export orders, which are facing stiff global economic headwinds. In turn, this moderated the sequential growth rate of output and pulled down some of the other sub-indices. However, inflation pressures remain elevated, with input prices accelerating and output prices still trekking up, albeit at a marginally slower pace. Overall, the numbers suggest moderation rather than a collapse in growth, and they confirm that inflation remains the primary policy concern.'

The headline inflation measured by Wholesale Price Index has been hovering around double digit mark. In July headline inflation stood at 9.22% from 9.44% in June. On the other hand the RBI has maintained its anti inflationary stance from almost one and half year, and in quarterly monetary policy review it increased its short term leading and borrowing rates by 50 basis points. The RBI's anti inflationary policy stance had affected country's economic growth. Indian economy grew 7.7% in the three months to June from a year earlier, its slowest pace in six quarters. India's manufacturing sector grew 7.2% in April-June from a year earlier, an improvement from the previous quarter but below the 10.6% growth clocked a year earlier, although the services sector continued to perform well and demand from rural consumers remains robust.

The S&P CNX Nifty touched high and low of 5,113.70 and 4,993.35, respectively.

The top gainers of the Nifty were Reliance Capital up 7.50%, RCOM up 6.85%, DLF up 6.68%, Tata Steel up 5.11% and Sterlite Industries up 4.24%.

On the flip side, HCL Tech down 3.39%, IDFC down 3.25%, Siemens down 2.14%, Tata Power down 2.05% and TCS down 1.76% were the top losers on the index.

The European markets were trading in red. France's CAC 40 plunged by 2.55%, Britain's FTSE 100 declined by 1.91% and Germany's DAX lost by 2.78%.

After four days of rally, all the Asian equity indices barring KLSE Composite finished the day's trade in the negative terrain on last trading day of the week as profit-booking emerged after four straight days of gains. While, drop in US shares ahead of a key jobs report too dampened the sentiments in the region. Meanwhile, Japanese Nikkei declined by 1.21 percent in the trade on news that capital investment in Japan for the April-June quarter was down 7.8% from a year earlier while, Chinese Shanghai fell a percent, with bank shares falling on worries Beijing will tighten credit even more after its recent move to effectively increase the amount banks must hold in reserve. However, the stock markets in Indonesia remained closed for Idul Fitri holiday.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,528.28	-27.76	-1.09
Hang Seng	20,212.91	-372.42	-1.81
KLSE Composite	1,474.09	26.82	1.85
Nikkei 225	8,950.74	-110.06	-1.21
Straits Times	2,843.09	-24.09	-0.84
Seoul Composite	1,867.75	-12.95	-0.69
Taiwan Weighted	7,757.06	-0.70	-0.01
Jakarta Composite	-	-	-

 

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